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What are the benefits of offsetting projects?

Carbon offset is a process employed to finance greenhouse gas (GHG) emission reduction/avoidance or sequestration that is equivalent to the remaining emissions of an entity, business, or any other area that goes beyond their value chain.

This financing is accomplished through purchases of carbon credits. One carbon credit corresponds to one metric tonne of reduced/avoided or trapped CO2 (CO2) as a result of the project that is financed by this system.

Once purchased, the credit is then retired using publicly accessible emission registries held by international standards as well as global exchanges. When a credit is utilized for offsetting, it becomes an offset and the credit becomes permanently removed, so it is not able to be reused (for the sake of transparency and accountability, carbon credits will be assigned serial numbers).

Carbon offset is effectively putting an end to carbon emissions for organisations, which will encourage them to speed up internal reductions, such as supply chain emissions, to justify the investment in low-carbon model of business, and eventually show that traditional business practices are no anymore an alternative.

To achieve net-zero emissions by 2050 on a global scale requires massive investments in carbon sinks. Carbon offset plays an essential part in fighting climate change as it permits funds to be devoted to projects that have high carbon reduction/avoidance or sequestration potential.

By bringing finance to projects that decrease or eliminate or sequester GHG emissions Carbon offsetting that is voluntary becomes an integral part of the overall climate strategy. It enlists the organization in climate action far beyond the value chain.

Carbon offsetting in voluntary form

Both the public and private sectors use carbon offsetting to meet compliance or for voluntary reasons and lead to two types of carbon markets. One is) compliance markets, which governments set up for example carbon tax or emission trading program (e.g. ETS, a.k.a.) and 2.) market for carbon that is voluntary which are where businesses that do not have any legal obligation choose to engage voluntarily to take the responsibility for their carbon emissions and provide added value to their clients and investors.

Their motives vary in their motivations to take action on climate change; to create added value for their customers as well as their investors and citizens to anticipate the future of regulation or to engage in a partnership process with principal stakeholders (e.g. employees or NGOs), etc.

Voluntary carbon offsets are a way of financing voluntary actions by buying carbon credits through the voluntary carbon market (VCM) that facilitate a measured and verified reduction/avoidance or sequestration GHG emissions elsewhere , while also supporting sustainable development, typically in those countries that require it most.

Why carbon offsetting is such a crucial tool for the climate change ‘toolbox’

In conjunction with the deep decarbonisation efforts Carbon offsets on a voluntary basis can help with carbon reduction and sequestration initiatives beyond a company’s value chain.

In the face of a climate crisis, it gives the opportunity to take immediate steps to assist in climate change mitigation , and accelerate climate action collectively.

For over ten years, the carbon market and the mechanism that offsets carbon have evolved through a continuous process of development, feedback and enhancement. Its complementary role to emissions reduction efforts is the topic of scientific consensus. In the Paris Agreement reminded us that global net-zero isn’t possible if we don’t employ every tool that is that is available to us, and carbon offset is among the tools. It is the Intergovernmental Panel on Climate Change (IPCC), highlighted in the final section in its 6th Assessment Report (AR6, April 2022) that the solutions for removing carbon from the atmosphere are essential for offset residual emissions and achieve net-zero.

But, the complexity and the evolution of carbon offsets that are voluntary has resulted in some resistance as well as confusion. This guide is designed to help you understand how voluntary carbon offsetting can help achieve net-zero and sustainable development goals. It examines the fundamentals and conditions required to implement an effective and rigorous voluntary carbon offsetting program as a complement to however not a replacement for, a science-based emissions reduction strategy.

We will analyse the voluntary carbon offset programs in depth, including the requirements for their implementation as well as their verification and certification. We will also provide information on the different types of projects, frameworks and best practices that we suggest companies take on.

By demonstrating our commitments, methods and strategies, we present the steps to implement a robust offsetting strategy as well as how to create new methods and projects.

In addition to reducing carbon dioxide (GHG) emissions that are aligned with the scientific method and protecting carbon sinks within the value chain such as mangroves and forests along the coast voluntary carbon offsets allow organisations to finance projects that have a significant environmental impact outside their own value chains.

How can carbon offset aid us in reaching net-zero?

There is a huge pressure from all directions to reach zero net emissions as soon as it becomes possible. We are currently in a state of emergency and that requires urgent and ad hoc action by business using every method possible.

Organisations cannot offset their way to net-zero. Net-zero is a long-term goal which requires deep decarbonisation of 90 to 95% of emissions and removal of the remaining 5-10 percent of emissions that remain. In the near-term, organisations are advised to make investments in offset initiatives which cut down on emissions in their value chain, to close the following issues globally:

Timing gap: As a world, we need to decarbonise as fast as possible. Current planned action from governments all over the world could lead to overshooting required timelines recommended by the IPCC as well as climate science.

Ambition gap: According to the Climate Action Tracker, all the global pledges and targets which are currently in force will contribute to a total of. 2.7degC of warming by the year 2100. In relation to climate-related policies in practice, it could cause approx. 2.5degC or 3.5degC of warming.

Finance gap: The government’s funding of low-carbon routes isn’t enough on their own. It is the United Nations Environment Programme (UNEP) estimates that the gap in finance currently stands at $ 4.1 trillion. Private sector investment is an essential tool for mobilizing capital, and it must be utilized in a productive method.

Carbon offset plays an important function in helping to fill the gaps. Although it isn’t meant to be considered as a solution, it should be seen as an effective way to finance sustainable development and support initiatives that are doing crucial work to protect habitats, ensure sustainable development practices and improve people’s lives, while also reducing some of the global carbon emissions.

International initiatives that are in development or already in place define the role of voluntary carbon offsetting in achieving zero emissions at an organisational level. These include The Oxford Principles for Net Zero Aligned Carbon Offsetting; The Science Based Targets Initiative (SBTi) as well as The Integrity Council for the Voluntary Carbon Market (ICVCM; the Voluntary Carbon Markets Integrity Initiative (VCMI), along with the ISO 14068 standard. The last two will release their corresponding publications in 2023.

For instance, as per the Oxford Principles of Net Zero Aligned Carbon Offsetting There are four essential elements that make up legitimate net-zero aligned offset:

Prioritize reducing your own emissions first, ensure that the environmental integrity of any offsets used and provide a clear explanation of how those offsets work.
Offsetting shifts towards carbon removal and long-lived storage offsets remove carbon dioxide from the air forever or nearly permanently.
Support the development of net-zero aligned offsetting.
Adopt a credible nature-based approach to carbon offsetting, such as forest rehabilitation.

A framework of strategic business decision-making The SBTi’s Corporate Net Zero Standard

In the month of October, 2021, the SBTi launched the Corporate Net-Zero Standard framework, working with CDP, Global Compact, the World Resource Institute and WWF. The Corporate Net Zero Standard is the world’s first framework to set corporate net zero targets according to the latest science-based climate. It provides guidance as well as the criteria and recommendations businesses must set scientifically-based net-zero targets that meet the criteria of keeping global temperature rise to 1.5degC.

How can we ensure the permanence of offsetting projects?

Climate change is already having an ongoing impact on global ecosystems, with rising sea levels as well as frequent flooding, wildfires, droughts and more. All of these risks must be more effectively integrated, not just in carbon finance, but (and above all) into all environmental projects.

As part of the certification process International carbon standard requires that projects to conduct a risk analysis which includes forecasting climate impacts at the level of the project, which must be demonstrated through project documentation and feasibility studies. If, for instance, part of a mangrove is likely to be eroded due to rising sea levels within the next 100 years, the VCS certification method requires that the mangrove area cannot be taken into consideration in calculations until an adaptation measure has been implemented to stop the erosion. Also, they must implement mitigation measures for risk (such as treatment of fuel, the creation of fire breaks , fire towers and the use of conservation easements, etc.) to lessen the risk of reverses.

This is a difficult exercise that requires foresight at the project levels, yet it allows us to consider the importance of adaptation actions. It is a vital point that we should consider: for greater chance of success the carbon offset project regardless of whether it is restoration, reforestation, or afforestation, or conservation, must be able to implement measures for adaptation and be aware of the risks posed by climate change.

In short, project developers have a genuine interest in doing their best to avoid this kind of incident from interfering in their projects through the implementation of the necessary measures and actions in advance.

In the case of extreme weather conditions, malicious act (e.g., deliberate fires), or negligence, standards, like the VCS have created “buffer reserves” (also called “pools”) to that each project contributes by making a selection of offset credits which cannot be sold on the open market the credits are ex-post, which means the reduction in emissions has already been achieved.

In accordance with the procedure that an insurance policy uses the credits that are set aside (reserved) are able to be used to compensate for reversals for any project. Put into practice, in the case that a reversal occurs, the reserved credits are cancelled in the buffer reserves, making sure that the credits issued still reflect the actual reduction in emissions.

The amount of credits that a project must set aside is usually based upon an evaluation of the project’s risk for reverses. Today, diversification of project types and locations (types or locations) guarantees that buffer reserves are able to withstand and not impacted even from extreme weather conditions as well as malicious acts like deliberate fires or negligence.

In the case of Gold Standard accredited projects, they are able to count on the concept of a “Compliance Buffer” that is not accessed after the crediting time of the project, further reducing the possibility of non-permanence or reversal.

The buffer reserves are frequently adjusted to reflect the advancement of science especially regarding climate change. Data and information on the reserve credits are accessible on the internet.

The various carbon offset projects

Restoration of ecosystems (reforestation of degraded forests, mangrove restoration, agroforestry, ecosystem conservation, reduction of deforestation, etc. ).
Renewable energy production on a limited scale or in areas not connected to electricity grids (solar and wind, biomass, etc. ).
Improvements in energy efficiency (energy-saving and more efficient cookstoves).
Better treatment of waste (biogas biochar, biogas. ).

All these types of projects are highly recommended from the community of scientists, according to the latest IPCC report, released at the end of April in 2022 (AR6 WGIII).

It is essential to support offset programs that bring environmental and social benefits to people, which are in line with the UN SDGs. These include objectives like combating poverty in all forms, providing safe drinking water and sanitation to all, achieving gender equality and empowerment of all girls and women and so on. Beyond climate protection, offsetting initiatives should be focused on delivering tangible and tangible benefits to the communities they operate, empowering them to have ownership of sustainable development.

For example, EcoAct’s prestigious Sudan Low Smoke Cookstoves project which was the first one to be built in a conflict zone, provides economic and health rewards for Sudanese families, with an emphasis on attention to female empowerment.

The Hifadhi Livelihoods Cleaner Cookstoves (financed via The Livelihood Fund and developed in partnership in collaboration with EcoAct) is providing local artisans and project officials to oversee the distribution of better and cleaner cookstoves to rural Kenya that have positive impact on communities, families, and the environment.

Many carbon offset projects are part and parcel of nature-based solutions

Nature-based solutions are defined in the International Union for Conservation of Nature (IUCN) as “actions to preserve environmentally sustainable and manage and restore natural or altered ecosystems that address societal challenges effectively and in a way that is adaptive, while providing both biodiversity and human benefits”.

The solutions based on nature are:

The conservation of ecologically sound and functional ecosystems
The sustainable management of ecosystems
Restoration of degraded ecosystems or creation of ecosystems

In the State of Finance for Nature in the G20 which was released in January 2022, showed that the current G20 investment in nature-based solutions is not enough. Nature-based solutions are an effective option for climate mitigation and adaptation . They can also provide numerous environmental and social co-benefits. They can play an important role in creating a sustainable and sustainable future and helping to ensure a fair transition in the world.